So, stock exchange is not allowed in usa using bitcoins?

[Puppet]

Does that mean security laws apply for everything that is surrounding us?

If you issue securities about them, yes.

[1715053855]

1715053855

[1715053855]

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[becoin]

The regulation comes from issuing and trading securities.

Right. And how do you know what I'm issuing is a security? Your wish to classify some bitcoin assets as securities is simply not enough. You have to point out exactly where the existing law applies to bitcoin assets? Stored value?!... What is that? I'm having really hard time trying to figure out just one value that is NOT stored.

Every bitcoin transaction is a private digital message where any third party has no place. This is a private message between 2 people. If this transaction does not include any government property (like fiat money) and does not use any government infrastructure then the government has no place there. Privacy is privacy is privacy. You either have privacy or you don't. Simple as that.

If privacy is outlawed, only outlaws will have privacy. - Phil Zimmermann on PGP
If zeros and ones are outlawed, only outlaws will use zeros and ones. - Jon  Matonis

In the current form applying the existing regulatory framework to bitcoin is counter productive. This only generates more outlaws. There is no point for the bitcoin community to spend time and money for lawyers. The legal guardians of the status quo do not care about the laws, because all monetary and financial laws are coined with one goal - to preserve the status quo at any rate.

[JoelKatz]

Right. And how do you know what I'm issuing is a security?

If it meets the legal definition. Lawyers have told me that if it represents an interest in something else and is easily traded, it would generally be considered a security.

Your wish to classify some bitcoin assets as securities is simply not enough. You have to point out exactly where the existing law applies to bitcoin assets? Stored value?!... What is that? I'm having really hard time trying to figure out just one value that is NOT stored.

The law is both clear and broad. Courts have interpreted the law to cover pretty much anything that represents ownership of a right that can be traded.

     The term "security" means any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence
      of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate,
      preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of
      deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or
      privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on
      the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating
      to foreign currency, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or
      participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or
      purchase, any of the foregoing. -- Securities Act of 1933 et seq

Courts have interpreted this list as showing the intent to cover as broad a scope as possible and absolutely will not limit the definition to just the listed examples.

Every bitcoin transaction is a private transaction where any third party has no place. This is a private message between 2 people. If this transaction does not include any government property (like fiat money) and does not use any government infrastructure then the government has no place there. Privacy is privacy is privacy. You either have privacy or you don't. Simple as that.

The law is not what you think it should be.

In the current form applying the existing regulatory framework to bitcoin is counter productive. This only generates more outlaws. There is no point for the bitcoin community to spend time and money for lawyers. The legal guardians of the status quo do not care about the laws, because all monetary and financial laws are coined with one goal - to preserve the status quo.

This is a counterproductive and self-destructive strategy. Look at the Internet -- the technology that has made it almost impossible for even the world's most repressive governments to stop their citizens from reading Western media and blogging about their government's abuses. It wasn't built by people who ignored the regulatory framework. It was built by people who found ways to work within it, worked to hold regulation at bay, and even change it where necessary.

[bitcoinbear]

I am so confused by this GLBSE crap,
What I am asking is it high risk using pure bitcoins for a stock exchange type thing? i am not sure how/why glbse is under attack but anyway since when is bitcoin considered good as USD?

Whats next bitcoin gambling games are gonna get taken down?

I thought bitcoins were pretty safe from this crap.

It is perfectly fine to run a stock exchange using btc in the US, but only if you comply with all the other laws and regulations concerning reporting and permits and liscensing.

[DeathAndTaxes]

IMHO going forward it looks like there are three avenues one could peruse as a GLBSE replacement.

1) The SilkRoad model.  
Accept it is a violation of law and take steps to ensure regulation and prohibition is difficult or impossible.  The largest issue with this model is trust.  Fees likely will be higher so trusting the operator is less risky although some type of Open Transaction type of system is likely advisable.  The issue becomes trusting issuers.  While GPG can be use many existing players have real world identities tied to their GPG identity.  To gain any protection from this type of model requires asset issuers to "start over".  

2) Offshore it.  
Find a location in a "financial privacy" location which has less restrictive securities laws.  It may not be possible to offer true equity but "revenue sharing contracts" potentially could be traded.  If indirect revenue sharing of US based entities was desired those entities could sell equity to an offshore corporation or trust which tend issues "shares" in a revenue sharing contract.   There is significantly higher startup and research costs involved.  Taxation for US based assets is non-optimal (US based companies would be required to withhold 30% taxes on any revenue paid to foreign owners).   With the proper licensing just about anything is possible offshore.  For example one could operate a bitcoin mutual fund or even hedge fund, open a Bitcoin funded Forex brokerage, etc.  The large risk is not knowing if you are "firewalled" enough from other nation states.  Sure if you are a citizen of the Cook Islands, your servers are on the Cook Islands, your bank accounts, offices, and other assets are on the Cook Islands and you comply with all laws in the Cook Islands you and your enterprise is likely "safe" even if the SEC disproves then again most people won't have that option.  Their "firewall" may have some holes in it.

3) Work for within the system.  
Get a broker dealer license, be regulated by SEC.  Comply with all regulation including KYC and AML.  Essentially the MtGox model except for securities.  A broker dealer can trade any security even "unlisted" securities (meaning not filed with SEC).   This is the so called pink sheets.   In theory a broker could accept Bitcoins (potentially only accepting Bitcoins) and allow trade in Bitcoin denominated securities for its private clients.   This option would require some significant legal research and has the highest cost.  It probably isn't viable at this point but if Bitcoin continues to grow it likely is inevitable.

 I am not a lawyer and not advocating any course of action.   Always seek legal counsel before starting, joining, or investing in any project where its legality is not settled law.

[becoin]

Lawyers have told me that if it represents an interest in something else and is easily traded, it would generally be considered a security.

Then every digital asset is a security, because it represents an interest in something else and can be easily traded due to its digital form...

By definition:

A digital asset is any object of text or media that has been formatted into a binary source that includes the right to use it. A digital file without the right to use it is not an asset.

What your lawyer basically told you is that you have no right to possess digital assets without government permission and regulation by respective government agencies? Why would anyone need blessing from the government to use THEIR OWN digital assets if those assets include the right to use them? And you say the law is clear?!

[justusranvier]

Many people are operating under the flawed assumption that law enforcement is about rules. It's actually about power.

If the people with power to enforce their will don't like what you are doing they will use their power to stop you. Law is one of the tools they can use, and they go to great lengths to maintain the pretense that law is objective and consistent, but don't fool yourself that you can depend on a superior understanding of it to protect yourself.

Many, many people have lost liberty or property because they mistakenly believed they could use superior legal arguments to fend off the government. It's a form of magical thinking.

Don't rely on magical incantations to protect yourself - use technology to make yourself a hard target.

[JoelKatz]

Lawyers have told me that if it represents an interest in something else and is easily traded, it would generally be considered a security.

Then every digital asset is a security, because it represents an interest in something else and can be easily traded due to its digital form...

I guess I'm not sure what you mean by "digital asset". For example, a Bitcoin is a digital asset, I would think. But it doesn't represent an interest in something else.

By definition:

A digital asset is any object of text or media that has been formatted into a binary source that includes the right to use it. A digital file without the right to use it is not an asset.

It doesn't represent an interest in something else though, at least not so far as I can tell. In any event, there isn't really such a thing as a "right to use" under US law.

What your lawyer basically told you is that you have no right to possess digital assets without government permission and regulation by respective government agencies? Why would anyone need blessing from the government to use THEIR OWN digital assets if those assets include the right to use them? And you say the law is clear?!

This wasn't about possession, but it was about issuing and creating a market. You don't need any sort of blessing to use anything. Nobody was talking about use.

[becoin]

This wasn't about possession, but it was about issuing and creating a market.

Issuing what? Paying with what? Paying with alphanumerical text strings representing what? To have a market you must have money circulating on it! Because this is the definition for market - buying and selling against money.

Bitcoin is not money. Money === legal tender. Bitcoin != legal tender. If government changes tax laws and allows individuals to pay taxes with bitcoins only then they will have the right to interfere in private relations based on bitcoin!

[Puppet]

Are you really that stupid or just doing a terrible job of playing devil's advocate?

No one here is saying bitcoins are illegal. No one is saying you cant use them to purchase goods or services, heck, you can almost certainly even use them to buy registered securities.

What you cant seem to comprehend is that trading unregistered securities is almost always unlawful. It doesnt matter what you pay these securities with, it doesnt matter if these securities are about  fiat, oil, gold, corn, bitcoins or chicken feed.

As to what constitutes a security, Ive give you the legal definition. If thats too hard to understand, consider that any contract that is publicly tradable is usually a security. You can make your own private contract between you and  Giga to rent his mining rigs, pay for it in bitcoins, and AFAIK, that would be fine. But if that contract is not in your name, and you can sell that contract and giga's obligations are to anyone owning that contract, ie, if giga sells tradable contracts to the public against anything of value, then it becomes a security and subject to regulation. Bitcoins dont have anything to do with it, it would be the exact same thing if giga's bonds pertained  to producing cows and were traded for bales of hay.

[DeathAndTaxes]

Bitcoin is not money. Money === legal tender. Bitcoin != legal tender.

One of those three is correct.  
Where do you get this idea that money = legal tender?

Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given socio-economic context or country.[1][2][3] The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past, a standard of deferred payment.[4][5] Any kind of object or secure verifiable record that fulfills these functions can serve as money.

Nope nothing about legal tender in there.  Hmm a "secure verifiable record that fulfills the function of a medium of exchange, a unit of account, and a store of value" what does that remind me of?

mon·ey   [muhn-ee]  Show IPA noun, plural mon·eys, mon·ies, adjective
noun
1. any circulating medium of exchange, including coins, paper money,  and demand deposits.
2. paper money.
3. gold, silver, or other metal in pieces of convenient form stamped by public authority and issued as a medium of exchange and measure of value.
4. any article or substance used as a medium of exchange, measure of wealth, or means of payment, as checks on demand deposit or cowrie.
5. a particular form or denomination of currency.

Nope not here either.

While the US Dollar is BOTH money AND legal tender in the United States (technically in the jurisdiction of the US courts) it is only money outside the US.  Try settling a debt in Spain arguing that because the dollar is money it is legal tender.

Legal tender status in the US derives from 31 USC 5103 which doesn't even mention the word money.

31 USC § 5103 - Legal tender
United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts.

 

[Mushroomized]

I'm hopeful that in future if decentralized bond/stock markets become popular, the law will be amended to ensure the requirements are proportional and handle jurisdictional issues better. Most likely, waiving some of the requirements if the securities are below a certain size and dropping the requirements to follow a countries laws if a security is merely purchasable there. That sort of thing already happens, we just need more of it. I doubt anonymous securities will ever be allowed unless somebody can find a really compelling use case for them.

Great post, if anything, we will get a more secure exchange from this.

That's the cool thing about bitcoin, if something gets hacked or scammed, we fight back and make something that is more secure

[becoin]

But if that contract is not in your name...

You really don't get it, do you? The contract IS in my name.

Everytime I get something in exchange for bitcoins I sign it with my name. My name is represented by the unique string called private key. Thus, unique alphanumerical string is generated representing ME and ONLY ME. This is my signature. And the message I send signed with this signature is concerning only ME and the other person I sending it to. It is none of your business or government's business to regulate MY PRIVATE relations!

[becoin]

Where do you get this idea that money = legal tender?

Mr. Bernanke "Gold is not money"
http://www.youtube.com/watch?v=jyTBhsEliUE

If gold is not money in the US then only money is the dollar bill. The dollar bill is the only legal tender in US!

Any kind of object or secure verifiable record that fulfills these functions can serve as money.

There is a big difference between "can serve as money" and "is money"?! Over the course of human history, many things have been used as money: metals, stones, shells, grains, livestock, fuel, land.

[DeathAndTaxes]

Where do you get this idea that money = legal tender?

Mr. Bernanke "Gold is not money"
http://www.youtube.com/watch?v=jyTBhsEliUE

If gold is not money in the US then only money is the dollar bill. The dollar bill is the only legal tender in US!

That is a logical fallacy if I ever heard one.
So these must also be legal tender in the US right?  





In the US:
Euro =/= Gold.
Euro == Money.
Therefor Euro == Legal Tender.

Lets take it to the next level.

http://www.ithacahours.com/
A private currency in the US (New York).

Ithaca hours =/= Gold.
Ithaca hours == money.
therefore Ithaca hours == legal tender.  Who knew!

[Puppet]

But if that contract is not in your name...

You really don't get it, do you? The contract IS in my name.

Everytime I get something in exchange for bitcoins I sign it with my name. My name is represented by the unique string called private key. Thus, unique alphanumerical string is generated representing ME and ONLY ME. This is my signature. And the message I send signed with this signature is concerning only ME and the other person I sending it to. It is none of your business or government's business to regulate MY PRIVATE relations!

You are talking about bitcoins again and no one is arguing they are illegal.  The topic of this thread is a stock exchange and GLBSE assets are not in your name, you can trade them freely with anyone and the asset issuers obligations trade with them. Those are therefore securities and trading unregistered securities is (almost always) illegal.

[becoin]

Therefor Euro == Legal Tender.

In the eurozone, yes. Euro is the legal tender. In the US the legal tender is US dollar. Where is the fallacy?

Private currency is just private currency. What we are talking about is what is money? From Mr Bernanke's statement becomes clear that gold is not money. Therefore the only option left is the dollar. The dollar is the legal tender as well.

[becoin]

The topic of this thread is a stock exchange and GLBSE assets are not in your name

They ARE in my name. It is just another question that you don't know my name, but it is none of your business either as it is concerning me and my counterparty. Everything I purchase with bitcoins is in my name! Every bitcoin I spend contains both the contract and my signature. The reason for this is already stated several times. I can't pay with bitcoins if I don't sign it with my private key. A bitcoin marketplace does not need a trusted third party to verify identity! I fully understand your pain as a trusted middleman but can't help. You are not needed anymore!

[Puppet]

The topic of this thread is a stock exchange and GLBSE assets are not in your name

They ARE in my name. It is just another question that you don't know my name,

please, stop acting so stupid. They are not. You can sell your gigamining bonds to me or anyone you want, and gigaVPS wouldnt have a clue, wouldnt have to agree, he wouldnt  even have to know,  his obligations would remain to the bond holder, whoever that is. Thats a tradeable security.

Try the same with for instance a rental contract, or a work contract. Can you sell your house rental agreement or work contract to me, and would your employer then owe me your salary? No. so thats a non tradeable contract. Its not a security.

If you can really not see the difference, then i cant help you.

[becoin]

You can sell your gigamining bonds to me or anyone you want, and gigaVPS wouldnt have a clue

That will be the case if I sell for fiat currency. In bitcoins is different. He will know if he cares to know. Information for every bitcoin transaction becomes publicly available in 10 minutes via the information for the blockchain. Again, only people directly involved will know what this transaction is about. Again, there is no need for a trusted middleman to verify identity of transacting parties.